Mexico experienced the 1994 stock-market crash known as the Mexican peso crisis. The crisis began after Mexico devalued the peso in December 1994, triggering a rapid loss of investor confidence.
Mexico had attracted substantial foreign capital, including short-term investments that could leave quickly. Political instability, a large current-account deficit, and the use of dollar-linked tesobonos increased vulnerability. After the devaluation, the peso lost much of its value, interest rates surged, and Mexican asset prices fell sharply.
The United States and international institutions assembled a rescue package worth tens of billions of dollars. The crisis also had effects beyond Mexico, including pressure on other emerging markets. In the United States, concern about contagion was sometimes described as the “Tequila effect.” This episode is separate from the Asian financial crisis that began in 1997.